Korea’s current account surplus drops on soaring energy prices

South Korea’s current account swung back into the black in May from a deficit the previous month that snapped 23 months of surplus booked since May 2020, but the latest surplus of $3.86 million marked a fall from a year earlier, preliminary data from the Bank of Korea showed Thursday.

Soaring coal, oil and gas import costs was the reason Asia’s fourth-largest economy, which heavily relies on imports for energy, posted the annual drop. The surplus in goods trade also declined to $6.65 billion in May from $2.74 billion a year prior.

“The goods surplus narrowed because of higher energy prices like oil and we will be seeing that trend to continue for the time being,” said Kim Young-hwan, a senior Bank of Korea official in charge of financial statistics.

Exports, led by chips and petrochemical products, climbed to $61.7 billion from $51.2 billion, while imports rose higher to $58.96 billion from $44.55 billion in May from the previous year.

Despite the shrinking gain seen in May, the current account surplus in the first half of this year would amount to $21 billion, which meets the bank’s expectations, the official added. The surplus had reached $19.17 billion in January-March, according to the data.

The data also showed the overall services deficit came to $20 million, pushing the account back into the red in four months. But the dip was much smaller than what it was a year ago thanks to higher shipping rates that had helped Korean shippers.

The primary income surplus, meanwhile, stood at $1.45 billion, reversing a $3.25 billion deficit in April while still falling far short of a $5.03 billion surplus seen in the previous year.

By Choi Si-young (siyoungchoi@heraldcorp.com)